Adidas leads the trio of value stocks on the German stock exchange whose estimates are below their intrinsic value

With European markets showing signs of resilience (the German stock index DAX recently rose by 1.48%), investors are closely monitoring value-add opportunities in this environment of moderate inflation and economic rebalancing. In this context, it could be particularly interesting to identify stocks that appear undervalued relative to their intrinsic value, as they could offer value-add potential in a stabilizing economic environment.

The 10 most undervalued stocks in Germany based on cash flow

Click here to see the full list of 28 stocks from our Undervalued German Stocks Based on Cash Flows screener.

Let’s uncover some gems from our specialized screener.

Overview: Adidas AG is a global company that designs, develops, produces and markets sports and lifestyle products in various regions and has a market capitalization of around 40.83 billion euros.

Operations: Adidas generates its sales primarily in three regional segments: EUR 5.16 billion in North America, EUR 3.20 billion in Greater China and EUR 2.31 billion in Latin America.

Estimated discount to fair value: 32.9%

Adidas AG reported a significant turnaround in the first quarter of 2024, with sales increasing to EUR 5.46 billion and net profits of EUR 170 million. Although sales growth forecasts are modest at 7.9% per year, earnings are expected to increase by 41.3% per year. Adidas is currently trading at EUR 228.7, well below the estimated fair value of EUR 340.61. Due to its cash flows and future earnings potential, Adidas is a compelling undervalued stock in the German market environment.

Overview: PSI Software SE specializes in the development and integration of software solutions to optimize energy and material flow for utilities and industry worldwide and has a market capitalization of around 345.38 million euros.

Operations: The company generates its sales mainly in two segments: Energy Management (EUR 141.78 million) and Production Management (EUR 148.79 million).

Estimated discount to fair value: 48.5%

PSI Software SE, currently valued at €22.30, is considered undervalued based on a discounted cash flow analysis, with a calculated fair value of €43.32. While return on equity is expected to remain moderate at 16.4%, the company’s revenue growth rate of 7.6% annually exceeds the German market forecast of 5.4%. Recent strategic developments include the appointment of Erol Bozak as CTO to drive cloud transformation initiatives, enhance PSI’s technological capabilities and potentially strengthen future profitability and market position.

Overview: SAP SE operates worldwide and offers a wide range of applications, technologies and services through its subsidiaries. Its market capitalization is around 216.95 billion euros.

Operations: The company generates 31.81 billion euros in its “Applications, Technology and Services” segment.

Estimated discount to fair value: 33.8%

SAP, valued at €187.22, appears to be undervalued according to discounted cash flow metrics, which suggest a fair value of €282.61. Despite a modest forecast return on equity of 16.1% over three years, SAP’s revenue and earnings growth forecasts outperform the German market average, with significant earnings growth of 34% expected annually. Recent strategic alliances and customer implementations of SAP S/4HANA Cloud suggest ongoing operational improvements and potential for sustainable growth, despite some financial volatility due to large one-off items impacting results.

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This Simply Wall St article is of a general nature. We comment based solely on historical data and analyst forecasts, using an unbiased methodology. Our articles are not intended as financial advice. They are not a recommendation to buy or sell stocks and do not take into account your objectives or financial situation. Our goal is to provide you with long-term analysis based on fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative materials. Simply Wall St does not hold any of the stocks mentioned.

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